Swiss cheese

Credit Suisse's guilty-lite plea lacks a point

Credit Suisse now has the distinction of being the first major bank in years with a US criminal conviction to its name. That ought to be cause for celebration in an era when the legal system has often fallen short in holding villains accountable for the financial crisis. But the Swiss institution's guilty plea looks almost pointless.

The Department of Justice has been careful to minimise damage to Credit Suisse. The bank is paying $2.8 billion in penalties, including a prior settlement with the Securities and Exchange Commission, and will be subject to a monitor's scrutiny. There's no indication, however, that it will have its American banking licences yanked or that either Chairman Urs Rohner or Chief Executive Brady Dougan has lost his job. In fact, it seems no top bankers involved with the illegal activities or in running the units responsible face criminal censure, let alone jail time, as a result of the settlement.

The logic for limiting the guilty plea's effect is understandable. The more restrictions a company faces, the greater the chances it could go belly up. That's what happened to Arthur Andersen in 2002. The number-crunching firm was found guilty of obstructing justice in the Enron accounting fraud. It had to give up its professional licences and sold most of its business units to rivals. The US Supreme Court overturned the conviction three years later, far too late to save the company.

The Swiss bank in any event has some reason to feel that it was treated unfairly. Rival UBS settled a similar case in 2009 but paid roughly a third as much in penalties and neither admitted nor denied wrongdoing.

The trouble is that, because no additional individuals have been charged and few restrictions have been imposed on the bank's operations, the Credit Suisse settlement looks suspiciously like a way for prosecutors to save face. They may hope that it encourages other financial institutions to stay on the straight and narrow. If it doesn't though, it will be tough to see what this guilty-lite plea will have accomplished.